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03.23.092:50 AM ET

Make a Deal With the Mob

Like the Gottis, the bonus-seeking bankers are the ones who know where the bodies are buried. Give them their money and let them get us out of this mess.

Just as taxpayers financed the lifestyle of Sammy “The Bull” Gravano when he helped put away crime boss John Gotti, we now need to finance the gangsters on Wall Street. Why? Because they’re the only guys who know where the bodies are buried.

No one in government likes to admit to it, but bad guys do business on the taxpayers' dime all the time. One source of mine is a federal informant who’s helped put away his fair share of murderers and criminals. And guess what? He lives pretty well in some undisclosed location (I don’t know where, but I get the impression the weather is good wherever he is because he plays so much golf), he’s safe and protected along with his family, he has a business, and he does all of this courtesy of you and me.

People in the Treasury Department who initially approved the payouts worried that the numbers guys would simply leave the firm rather than stick around to clean up the mess they created.

I have to admit, I’ve grown pretty fond of this guy: He’s likeable, has a good sense of humor, and seems pretty smart. But the fact is most people would consider him a scumbag, someone you wouldn’t trust to take out your trash because he’s the type of guy who would search through it, find a piece of personal information, and commit identity theft. Oh yeah, I left one thing out: I’m pretty sure he’s killed people.

Yet as bad as he is, he’s put away many more killers, helped take down a criminal enterprise, and saved society a lot of hardship and money. In the end, I would argue, cutting a deal with this devil is worth it.

I was reminded of all of this last week, amid all the acrimony in Congress, coming from our president and from my colleagues in the press when the news broke that employees of insurance giant AIG, many of the same people who helped send the company into near-liquidation through their risky business practices, will be getting huge bonuses this year.

Let me say right up front, if there is a group of people not just on Wall Street but on the entire planet who don’t deserve bonuses this year, it’s got to be those in AIG’s structured finance group. Especially since no one really knew how dangerous this business—the credit-default swap—had become because it was one of those hidden, “off-balance sheet” setups, which is nothing more than a legal way to hide something under the accounting laws.

And if that doesn’t have your blood boiling, consider this: AIG provided so much of this insurance in the form of CDs held by banks and companies all over the world that if the firm didn’t make good on its commitment, and the bonds were without insurance, they would either go into default or fall dramatically in price, causing massive writedowns and further worsening the credit crisis that is at the heart of the nation’s financial problems.

That’s why in September of last year, the federal government started spending billions of dollars bailing out AIG, and that’s why it later spent billions more bailing out the likes of Citigroup, Bank of America, Merrill Lynch, Goldman Sachs, Morgan Stanley and several other surviving banks.

All these firms had some pretty unsavory characters working at or near the top of the management chart. They didn’t actually murder people, but they certainly shot our banking system to hell—and made a killing for themselves. They invested in paper that was among the riskiest in the securities markets because of the big returns it offered and because it allowed them to pay themselves huge bonuses during the boom years, without ever considering the possibility that they were taking undue risk and possibly squandering the shareholders’ money.

In some cases, they borrowed 40 times more than they had in capital to finance these degenerate gambling sprees. And at the same time, they spent money on Gulfstreams, fancy offices, rugs, and commodes even as they cut their workforce because of the mounting losses. Now these same people want bonuses for their “top” producers. And I say give it to them.

Lost in the hoopla surrounding the AIG-bonus fiasco was the reason the bonuses were paid in the first place: The only people who know how to unwind the problem at AIG are the people who put the company in the hands of the government. Management and, as its now becoming clear, people in the Treasury Department who initially approved the payouts worried that the numbers guys would simply leave the firm rather than stick around to clean up the mess they created. They would have to hire people from the outside, and who in their right mind would want to work for a company nearly 100 percent-owned by the federal government?

The same could be said of the other larger firms and their big producers who have been targeted in the populist rage being directed at Wall Streeters who work at firms that took government bailout money but are still taking home bonuses. Merrill, for instance, awarded one of its top investment bankers more than $30 million in 2008, the year it was forced to sell itself to Bank of America, which in turn needed a government bailout itself to complete the deal in the first place.

The solution Congress arrived at last week was to tax these bonuses at a 90-percent rate. Sounds nice, but what’s the end game? Just as the derivatives people at AIG will simply leave the firm if they don’t get their bonus money, and so will many others across Wall Street, depleting these firms of talent and people—many of whom didn’t cause the problem—needed to rebuild franchises and the banking system itself.

New York Attorney General Andrew Cuomo is threatening to release the names of the top earners at Merrill Lynch as he investigates how bonuses were paid out just before the company announced its massive losses and was forced to merge with BofA. Cuomo’s thinking sounds logical: He wants to make sure people who were paid bonuses weren’t responsible for getting Merrill in the mess that nearly sank the firm. But consider the collateral damage: Amid Cuomo’s thirst for justice, scores of Merrill investment bankers, highly paid as they were last year, are thinking of leaving the newly combined Merrill Lynch and BofA, people at the firm tell The Daily Beast.

Andrea Orcel, the head of the firm’s European investment bank, is one of those, these people say; he made more than $30 million in 2008, but his team brought in around $500 million in revenue and he could just as easily work out of the offices of some European bank or start a firm of his own, rather than stay with BofA and get taxed at 90 percent.

So maybe it's time to make peace with the Mob—the Wall Street Mob, and let them have their bonuses, and let them take jobs in the Treasury Department to help get us out of this mess. And since we’re talking about the Mob here, consider the advice of Don Corleone himself on how to survive during treacherous times: Keep your friends close, but your enemies closer.

Charles Gasparino is CNBC's On-Air Editor and appears as a daily member of CNBC's ensemble. He is a columnist for the Daily Beast and a frequent contributor to the New York Post, Forbes, and other publications. His forthcoming book about the financial crisis,
The Sellout, is scheduled to be published later in 2009.